Shares in British Sky Broadcasting PLC are falling for the sixth straight session Tuesday, a day after News Corp.'s bid for the satellite broadcaster was referred to the competition regulator.
With the review likely to take many months, there's little incentive for short-term investors, such as hedge funds, to keep hold of the stock. BSkyB shares were 2.1 percent lower early Tuesday at 700 pence ($11.07). The decline means that the stock is underperforming in the FTSE 100 index of leading British shares. Shares around the world have been hit Tuesday by mounting fears over the financial health of Spain and Italy.
BSkyB shares have taken a battering over the past week, falling from 850 pence, as a phone-hacking at the Sunday tabloid News of the World escalated.
The paper, which closed Sunday after 168 years, was owned by News Corp.'s British subsidiary News International. News Corp. shares have also taken a pounding, as investors doubt whether it will get the 61 percent of BSkyB it doesn't already own.
On Monday, News Corp. withdrew its promise to spin off Sky News, which had been a condition for buying the remaining shares in BSkyB, triggering a referral to the Competition Commission from Culture Secretary Jeremy Hunt.
Britain's Competition Commission now must hold a full-scale inquiry into whether the takeover would break anti-monopoly laws. These inquiries usually take six months and Murdoch must be hoping that the current febrile atmosphere surrounding the bid cools down.
"News Corp. now has a decent time for the crescendo of allegations to peak and be dealt with and relevant actions to be taken, assuming these are containable," Investec Securities analyst Steve Liechti said.
However, with police apparently still in the early stages of a criminal investigation of the News of the World, Liechti said there is a danger that News Corp. could be forced to reduce its stake in BSkyB if Britain's communication regulator decides it is not "fit and proper" to control a broadcasting license.
On Tuesday, former Prime Minister Gordon Brown joined the criticism of News International, repeatedly accusing the company of employing criminals to obtain confidential information about his bank account, taxes and other issues.
"If I, with all the protection and all the defenses and all the security that a chancellor of the exchequer or a prime minister, am so vulnerable to unscrupulous tactics, to unlawful tactics, methods that have been used in the way we have found, what about the ordinary citizen?" Brown said in an interview with the BBC.